Bank Debit-Card Fees Under U.S. Justice Department Review

The Federal Reserve, acting on a provision of the 2010 Dodd-Frank Act, imposed rules on Oct. 1 limiting fees card networks charge merchants to 21 cents per transaction, about half what retailers had been paying. Photographer: Chris Keane/Bloomberg

Nov. 22 (Bloomberg) -- The U.S. Justice Department is
conducting an antitrust review of statements and actions by
banks and their trade associations about imposing fees on
customers who use debit cards.

Assistant Attorney General Ronald Weich described the
review in a letter released today by Representative Peter Welch,
a Democrat from Vermont, who had requested an investigation.

“Please be assured that if it finds that individuals,
banks or other parties may have violated the antitrust laws, the
department will take appropriate action,” Weich wrote in the
letter, dated Nov. 16.

Bank of America Corp. said on Nov. 1 that it wouldn’t
charge debit-card users $5 per month, four weeks after the
firm’s announcement of the fee sparked a backlash from customers
and lawmakers. JPMorgan Chase & Co. and Wells Fargo & Co. had
previously dropped plans for such charges.

Welch was among five House Democrats who last month asked
Attorney General Eric Holder to investigate whether U.S. banks
and their trade groups colluded on whether to impose fees in
response to caps on what they can charge for using debit cards.

“While big banks like Bank of America beat a hasty retreat
on their debit card fee strategies, I have no doubt that they
will continue their quest to dig deeper into the pockets of
struggling consumers,” Welch said today in a statement. “As
they consider their next move, they should be aware that there
is a cop actively on the beat.”

21 Cents

The Federal Reserve, acting on a provision of the 2010
Dodd-Frank Act, imposed rules on Oct. 1 limiting fees card
networks charge merchants to 21 cents per transaction, about
half what retailers had been paying. In response, lenders
including Bank of America and Wells Fargo considered new charges
for debit customers to make up some of the $8 billion the
largest banks may lose under the rules.

Bank executives and the trade groups representing the
industry said during debate over the fee caps that lenders would
need to raise other charges on debit-card users.

“The harm will fall largely on consumers; banks will be
forced to lose money on debit interchange transactions and
likely will compensate by increasing fees in some way for
deposit customers,” JPMorgan Chief Executive Officer Jamie
Dimon wrote in an April letter to shareholders.

Backlash

Bank of America’s fee announcement sparked a backlash from
customers, criticism from lawmakers and a rebuke from President
Barack Obama. The Charlotte, North Carolina-based bank reversed
course in November after SunTrust Banks Inc. and Regions
Financial Corp. decided to eliminate their check-card fees.
Wells Fargo and JPMorgan canceled plans for fees and Citigroup
Inc., U.S. Bancorp announced they wouldn’t impose new charges.

Tom Kelly, a spokesman for JPMorgan, and Anne Pace, a
spokeswoman for Bank of America, declined to comment on the
letter. Lisa Westermann, a spokeswoman for Wells Fargo, didn’t
immediately have a comment on the review.

Trish Wexler, the spokeswoman for the Electronic Payments
Coalition, a trade organization that represents lenders like
JPMorgan, Wells Fargo and Bank of America, also declined to
comment.

John Berlau, director of the Center for Investors and
Entrepreneurs at the Competitive Enterprise Institute, a free-market policy group, said today that the banks’ actions
demonstrate they weren’t price-fixing.

“The fact that Bank of America dropped the debit card fee
due to competition from other banks and credit unions, shows
there was no conspiracy -- just different responses to the
massive new costs of the price controls in the Durbin
Amendment,” Berlau said.